The importance of personal finance education
Speech by Clive Briault, Managing Director, Retail Markets, FSA
IFS Student Investor Challenge Prize-Giving
25 April 2007
I am delighted to be here today at the National Final of the 2007 Student Investor Challenge. I would like to extend my congratulations to the finalists, and to congratulate in advance whoever are announced as the winners later today. I also pay tribute to the enthusiasm and expertise of all the 28,000 students who entered the competition this year.
The Student Investor Challenge shows us that there are many ways in which young people can engage in finance. It teaches skills in business, management, team work and other key qualities invaluable to your future life in the workplace and in your lives outside work. And it is a good example of how skills acquired early in life can be a sound investment for the future.
Why is the Financial Services Authority so interested in this? It is because financially capable and confident consumers are not only better able to look after their own interests, but are also able to act as a strong force to promote a genuinely competitive market for retail financial products and services. That is why we are leading the National Strategy for Financial Capability.
The lack of financial capability is a key challenge for society, on a par with concerns about the environment and obesity. For this reason, it is vital that good personal finance education is provided in schools. That way we can help to ensure that young people have a solid grounding in financial matters at an early age before they begin to take on financial responsibilities.
Our Financial Capability Baseline survey, published in March 2006, confirmed that we will be storing up problems for the future if we do not take urgent steps to improve levels of financial capability in the UK. Too few of us plan ahead and too few of us understand financial products or shop around. The survey showed that the under 40s are less financially able than their elders. Moreover, young people today face greater financial responsibility, and at an earlier age, than did the older generation in this room at their age.
For example, young people today can access credit cards and debt more easily; they have to fund themselves through university; and, when the time comes to start work they will need to take some difficult decisions on taking out a pension, and taking out a mortgage, at a time when they are also struggling to pay off debt or to establish some savings. Gone are the days when you had to ask your bank manager in person for a credit card, or join a long queue to be granted a mortgage.
A recent survey of one thousand 14-18 years olds across the country showed that more than 50% of the young people surveyed had been, or were, in debt by the time they were 17, and a further 26% regarded credit cards and overdrafts as being a good opportunity to extend their spending power.
We plan to spend £90mn on our Financial Capability programme over the next five years. We aim to reach at least 10 million people by 2011, providing them with personal finance education and information at key stages in their lives - through schools; through further and higher education; through advice services for young people not in education, employment or training; to adults in the workplace; and to new and expectant parents.
The FSA Schools Benchmark survey, published in June 2006, looked at personal finance education in over 1,000 UK schools. It found that 98% of teachers in secondary schools believe that personal finance education is important. However, less than one third of these teachers felt confident in teaching it, and most said they would like more support and resources to help them. They also told us that the main barrier to delivery of effective personal finance education was an already stretched school curriculum.
A step change in schools is needed. To do this we need to raise the profile and status of personal finance education; and to provide support to teachers to ensure that they are confident and competent in delivering financial education to pupils.
In England, this work is being taken forward through the Learning Money Matters programme being implemented by our partner, the personal finance education group (pfeg). This work has become even more crucial since the Government committed to giving personal finance greater prominence in the revised curriculum. Learning Money Matters builds on recent curriculum reviews and helps to prepare teachers for the planned changes, providing them with both resources and support so that they can provide personal finance education in an effective and engaging manner.
Our Schools initiative therefore works with the grain of existing education policies. Personal finance education can be integrated into a large number of subjects in the curriculum such as maths, personal, social and health education (or PSHE), business studies, citizenship, enterprise education and work-related learning. I also see our initiatives as being complementary to others, such as the programmes and courses offered by the IFS School of Finance.
Learning Money Matters began last autumn and has made an excellent start: by the end of last month, pfeg were working with 617 schools in England, and a further 206 schools have signed up. The initiative aims to reach 1.8 million students in 4,000 secondary schools by the end of 2011.
To deliver this initiative and to meet these targets, the FSA have helped pfeg build its capacity and they have appointed five regional directors across England, each with a team of four full-time pfeg consultants, and additional freelance support. They are providing schools with the resources and support they need to plan and teach personal finance education.
But this is a national strategy, so we are also working closely with the relevant organisations in Scotland, Wales and Northern Ireland. We are funding posts in Scotland, Wales and Northern Ireland to provide support and training to local authorities in each country for financial education.
In Scotland, we are providing funding for two development officers to work within the Scottish Centre for Financial Education to provide local authorities with training and support. We anticipate funding a third post from April 2008.
In Wales, we are funding a financial capability adviser to work within a Welsh Centre for Financial Education, to be established later this year, to provide support to schools. Again, we anticipate funding a second post from next April.
And last but not least, we will fund two development officers to work within the Northern Ireland Council for the Curriculum, Examinations and Assessment to train and support teachers in the delivery of personal finance education. One development officer will focus on primary schools, and the other on secondary education.
Personal finance education in schools will help to put our young people on track. It will help pupils feel more in control of their money and make sensible decisions in the future. It is clear that it is important to engage young people in financial education early in life, and secure a financially capable future for our young people. I welcome the part the IFS Student Investor Challenge plays in this.